Q3 2025 Apple Inc Earnings Call
My name is suasi Chandra Molly director of investor relations. Today's call is being recorded.
Speaking first today is Apple's CEO, Timothy Cook, and he'll be followed by CFO Kevan Parekh. After that, we'll open the call to questions from analysts.
Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements including without limitation those regarding Revenue. Gross margin operating expenses, other income and expense taxes, Capital, allocation and future business Outlook. These statements involve risks and uncertainties that may cause actual results or Trends to differ materially from our forecasts, including risks related to the potential impact to the company's business and results of operations from macroeconomic conditions, terrorists and other measures and legal, and Regulatory proceedings.
For more information, please refer to the risk factors discussed in Apple's, most recently filed reports on form 10 q and form. 10K and the Form 8K filed with the SEC today along with the associated press release.
Additional information will also be in our report on form 10q for the quarter ended. June 28th 2025 to be filed tomorrow and in other reports and filings we make with the SEC.
Apple assumes no obligation to update any forward-looking statements, which speak only as of the date. They are made.
I'd now like to turn the call over to Tim for introductory remarks.
Thank you. Good afternoon, everyone, and thanks for joining the call.
Today, we are proud to report a June quarter revenue record of $94 billion, up 10% from a year ago, which was better than we expected.
EPS set a June quarter record of a157 up, 12% year-over-year.
We saw an acceleration of growth around the world in the vast majority of markets we track, including Greater China and many emerging markets.
And we had June quarter Revenue records in more than 2 dozen countries and regions including the US. Canada Latin America Western Europe, the Middle East, India, and South Asia.
Matt continued to see, excellent results with Revenue up 15% year-over-year. And we set another all-time Revenue record in Services, which grew 13% with double digit, growth in both developed and Emerging Markets.
Last month, we hosted WWDC and incredible event for our developer Community with Millions. Joining us online and more than a thousand developers here in person at Apple Park,
We shared some truly exciting updates, including a stunning new design crafted from a material. We call liquid glass. It's both beautiful and expressive. And for the first time ever, this design extends, across all of our platforms, we can't wait for users everywhere to experience it this fall.
And we were excited to share some updates across our AI work. We announced even more capabilities, coming later this year, including live translation and workout buddy. In addition to those new features, we announced new support for a number of languages. And we opened up access to the on-device foundation models at the core of Apple intelligence enabling developers to build a whole new experience for our users.
It's wonderful to see great momentum building for our platforms. iOS 16, macOS 16, and iPadOS 16 are by far the most popular developer betas we've had.
Taking a step back. We see AI as 1 of the most profound Technologies of our lifetime.
We are embedding it across our devices and platforms, and across the company. We are also significantly growing our investments. Apple has always been about taking the most advanced technologies and making them easy to use and accessible for everyone. And that's at the heart of our AI strategy.
With Apple Intelligence, we're integrating AI features across our platforms in a way that is deeply personal, private, and seamless—right where users need them.
We've already released more than 20 Apple intelligence features, including visual intelligence cleanup and powerful writing tools. We're making good progress on a more personalized. Siri and as we've said before we expect to release these features next year.
Apple silicon is at the heart of all of these experiences enabling powerful, Apple intelligence features to run directly on device.
For more advanced tasks, our servers also, powered by Apple silicon deliver, even greater capabilities, while preserving user privacy through our private Cloud compute architecture.
We believe our platforms offer, the best way for users to experience the full potential of generative. AI
Thanks to the exceptional performance of our systems. Our users are able to run generative, AI models right on their Mac, iPad and iPhone.
We're excited about the work we're doing in the space and it's incredibly rewarding to see the strong momentum building.
Now, let me turn to more details about our results for the quarter starting with iPhone.
IPhone Revenue was 44.6 billion dollars of 13% from a year ago and we set a June quarter record for upgraders.
This strong, broad-based performance was driven by the incredible popularity of the iPhone 16 family, which was up strong double digits year-over-year compared to the 15 family.
We also recently marked a significant milestone: we shipped the 3 billionth iPhone since its launch in 2007.
From the pro models with the PowerHouse a18 Pro and Innovative Pro camera features to the iPhone 16 e with breakthrough battery life and a 2-in-1 camera system. Users are finding so many reasons to love the best iPhone lineup we've ever created.
An iOS 26 will take that experience. Even further.
In addition to the beautiful new design, and Powerful, Apple intelligence features, it introduces a range of meaningful updates like real time, call screening and hold assist in the phone app. Smarter messaging tools and new live translation features.
It all adds up to a smarter more personal iPhone experience that we can't wait for users everywhere to enjoy this fall.
In Mac, we had another strong quarter with revenue of 8 billion dollars up. 15% year-over-year, largely driven by the strength of the M4, MacBook, Air.
An Emerging Markets with strong double-digit growth on Revenue, as well as strong double-digit growth on both upgraders, and customers new to Mac.
MacBook Air, the world's most popular laptop, unlocks a whole new level of performance with the power of M4.
MacBook Pro customers. Meanwhile continued to be drawn to its incredible power and the longest battery life we've ever had on a Mac.
Customers are also loving the newest Mac Studio which is the most powerful Mac we've ever made with Next Level capabilities, to tackle even the most demanding AI workflows.
At the same time, Mac Mini continues to win over customers by packing, so much performance into an ultra compact design.
And with fantastic new updates and Mac OS Tahoe, 26 from the phone app to live activities to our biggest ever update to Spotlight. Mac users across our entire lineup are going to find delightful new ways to stay connected and productive.
For iPad. June quarter Revenue was 6.6 billion dollars our incredibly versatile, iPad lineup, brings together, power and portability like never before.
And users are already excited for our biggest iPad software update ever with the upcoming release of iPad. OS, 26.
It starts with a new windowing system that's remarkably intuitive, giving users more control than ever of their iPad experience. An enhanced Files app makes it easier than ever to stay organized.
And that's all on top of a beautiful new software design that brings these updates to life.
Turning to wearables home and accessories, Revenue was 7.4 billion and we saw a June quarter record for upgraders to Apple watch.
During the quarter, we marked the 10-year anniversary of Apple, watch celebrating a decade of helping users navigate their health and fitness Journeys and with watch OS 26. Apple watch will be more intelligent than ever with smart updates to the workout app and smartstack along with a fresh new design. That feels both Dynamic and personal.
We're also thrilled about what's coming to Apple Vision Pro with vision OS 26, introducing spatial, widgets that, let users customize their digital space. More lifelike personas and new Enterprise apis that Empower companies to build their own spatial experiences.
And this fall new features for our latest airpods. Lineup will unlock even more possibilities from studio, quality audio recording to using airpods as a camera remote. Giving users, powerful new ways to capture content and stay connected.
As we're innovating across our lineup, we're especially proud of the work we are doing to help our users live healthier lives.
Since we first launched our hearing health features for AirPods Pro 2, I have received notes from people who are delighted to be able to connect more deeply with loved ones, whether it's with AirPods Pro, Apple Watch, or iPhone. It's amazing to see the power of our health and safety features, from hearing tests to fall detection alerts to regular rhythm notifications, having such a profound impact.
Turning to Services revenue for the June quarter was 27.4 billion dollars of 13% from a year ago and an all-time record.
Apple TV, plus scored, 81 nominations a record for the platform across nearly every eligible category for this year's Emmy Awards.
Severance leads all Emmy nominees with 27 nominations and the studio follows close behind with 23 nominations, more than any other freshman comedy series ever. It's amazing to see how these and other Apple TV shows have captured the popular imagination.
To date Apple TV plus has earned more than 2700 Award nominations and 585 wins on the strength of the highest rated original content of any streaming Network.
And we continue to see very positive Trends in the June quarter, with TV, plus viewership up strong double digits year-over-year.
in June, we were also thrilled to release F1 in theaters around the world 1 of The Summer's most unforgettable blockbusters,
Anniversary with 10 years of Apple music to Mark the occasion. We launched an all-new Studio space in Los Angeles for artists to create content and connect with fans.
And later this year, we're bringing Apple music users even more to love from an enhanced listening experience with automix, which mixes songs like a DJ to lyrics translation and more.
The App Store meanwhile continues to be the very best place to discover the latest apps from developers around the world in a safe and trusted way. And App Store Revenue group, double digits year-over-year, setting a June quarter record
In retail, we continue to find opportunities in emerging markets to connect with even more customers.
We recently launched the Apple store online in Saudi Arabia and we couldn't be more excited to open new stores in the UAE and India later this year.
We were also delighted to welcome customers in Japan to a new location in the heart of Osaka.
Across everything we do at Apple. We show up by Leading with our values. We feel strongly that the benefits of Technology should be shared by everyone.
That's why we make technology for everyone.
In May to Mark Global accessibility awareness day, we announced updates to help users learn connect and interact with their worlds, including magnifier for Mac a new Braille experience and accessibility reader. A new systemwide reading mode to make it easier to understand content.
And we're proud to introduce accessibility nutrition labels. Giving users an understanding of accessibility features before they download an app. While helping developers educate people on features their app support.
This month, we also announced a half a billion dollar commitment with MP materials to strengthen the supply of vital recycled rare earth materials in the US and support American industry.
And in August, we're opening our all-new Apple Manufacturing Academy in Detroit to train and support American manufacturers.
These Investments are part of Apple's largest ever. Spin, commitment, which we announced earlier this year.
Over the next 4 years. Apple is investing 500 billion in the US driving Innovation and creating jobs in Cutting Edge Fields like Advanced manufacturing silicon engineering and artificial intelligence.
We're proud of this work and all that we're doing to tap into American innovation and bring the best technology experiences to users across the globe.
And we continue to look for further opportunities to do even more.
Finally, the situation around tariffs is evolving. So let me provide some color there.
For the June quarter, we incurred approximately $800 million of tariff-related costs for the September quarter. Assuming the current global tariff rates, policies, and applications do not change for the balance of the quarter and no new tariffs are added, we estimate the impact will add about $1.1 billion to our costs.
This estimate should not be used to make projections for future quarters. As there are many factors that could change including tariff rates.
We're really proud of our results for the June quarter and I want to thank our teams and our customers.
In everything we do. We're driven by transformative, Innovation, delivering, the most exceptional products, and services, we've ever created, and we're especially excited about what's ahead.
With that, I'll turn it over to Kevin.
Thanks, Tim and good afternoon everyone. Our revenue of 94 billion was up 10% year-over-year and is a new June quarter record. We grew in every Geographic segments and in the vast majority of the markets, we track
Products revenue was $66.6 billion, up 8% year-over-year, driven by growth in iPhone and Mac. Thanks to high levels of customer satisfaction and strong loyalty, our installed base of active devices reached another all-time high across all product categories and geographic segments.
Services Revenue was 27.4 billion up 13% year-over-year and an all-time record. We saw strength across the world with double digit growth in the majority of our markets.
Approximately 800 million dollars in tariff related costs Tim mentioned earlier.
Products. Gross margin was 34.5% down 140 basis. Point sequentially driven by mixed and tariff related costs. Partly offset by cost savings.
Services. Gross margin was 75.6% down. 10 basis point sequentially.
Operating expenses landed at 15.5 billion dollars up 8% year-over-year.
Performance led to June, quarter records for both net income at 23.4 billion and diluted earnings per share of a 1.57, which was up 12% year-over-year.
In cash flow was also strong at 27.9 billion.
Now, I'm going to provide some more details for each of our Revenue categories.
iPhone revenue was $44.6 billion, up 13% year-over-year, driven by the iPhone 16 family. As Tim noted, we saw iPhone growth in every geographic segment and double-digit growth in many emerging markets.
The iPhone activity in select regions grew to an all-time high in total and in every geographic segment, and we reached a June quarter record for upgraders.
According to a recent survey from World panel formerly of cantar iPhone was a top selling model in the US. Urban China, the UK Australia and Japan during the June quarter.
And we continue to see very high levels of customer satisfaction in the U.S. at 98%, as measured by 451 Research.
Mac Revenue was 8 billion up. 15% year-over-year driven by continued strength of portfolio, including MacBook Air, Mac Mini, and MacBook Pro.
We grew in every Geographic segments and saw a double-digit growth in Europe, greater China and the rest of asia-pacific.
The Mac install base reached an all-time high and we hit a June quarter record for upgraders.
In the US customer satisfaction was recently measured at 97%.
IPad Revenue was 6.6 billion, down 8% year-over-year, which was expected given the difficult compared against the launch of the iPad Air, and iPad Pro in the year ago quarter.
At the same time, the iPad install base reached, another all-time high and over half of the customers who purchase an iPad during the quarter, were new to the product.
And based on the latest reports from 451 research, customer satisfaction was 98% in the US.
Wearables, home, and accessories revenue was $7.4 billion, down 9% year-over-year. This was driven by a difficult comparison on accessories due to the prior year's iPad launches that I just referred to.
The Apple watch install base, reached a new all-time high with over half of customers, purchasing an Apple Watch during the quarter being new to the product.
We also set a quarterly record for upgraders, on Apple watch.
In the latest customer satisfaction for watching. The US was reported at 97%.
Our services Revenue reached, an all-time high of 27.4 billion up 13% year-over-year. The performance in the due quarter was broad-based. We saw a sequential acceleration across the majority of the categories including cloud services, where we reached an all-time Revenue record driven by the year-over-year growth of iCloud paying accounts.
We saw strong momentum during the June quarter and the growth of our install base of active devices gives us great opportunities for the future.
Customer engagement across our services offerings. Also continue to grow both transacting and paid accounts. Reach new all-time highs with paid accounts growing double digits year-over-year.
Paid subscriptions, also, grew double digits. We have well over a billion paid subscriptions across the services on our platform.
We continue to improve the quality and breadth of our service offerings from the new Apple games app to a continued expansion of tap to pay and wallet.
Turning to Enterprise organizations are continuing to invest in Apple products to drive employee Innovation, and productivity with companies like PayPal and roach deploying more maps of the workforce. We had the best June quarter ever for mac and Enterprise.
In Thailand science, Commercial Bank, 1 of the largest High Banks has deployed thousands of iPads across their branches to enhance the quality and efficiency of their banking operations from loan services to wealth management.
CAE a leader in Pilot training and simulation technology is using Apple Vision Pro to enable Pilots to become more familiar with aircraft procedures, leading to more productive, in-person flight simulator training outcomes,
Let's turn to our cash position and capital return program.
We ended the quarter with $133 billion in cash and marketable securities.
5 billion dollars of new debt and increased commercial paper by 4 billion, resulting in 102 billion, in total debt.
Therefore, at the end of the quarter, net cash was 31 billion.
During the quarter, we returned over $27 billion to shareholders. This included $3.9 billion in dividends and equivalents and $21 billion through open market repurchases of 104 million Apple shares.
As we move into the September quarter, I'd like to review our Outlook which includes the types of forward-looking information that you hosting referred to.
Importantly, the color we're providing assumes that the global tariff rates policies and application remain in effect. As of this call, the global macroeconomic Outlook does not worsen from today and the current Revenue share agreement with Google continues.
We expect our September quarter total company Revenue to grow mid to high single digits year-over-year.
We expect Services Revenue to grow at a year-over-year rate similar to what we reported in the June quarter.
We expect gross margin to be between 46% and 47% which includes the estimated impact of the 1.1 billion tariff related costs. That Tim referred to earlier
We expect operating expenses to be between $15.6 billion and $15.8 billion.
We expect, oh, to be around -$25 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 17%.
Finally, today, our board of directors has declared a cash dividend of 26 cents per share of common stock payable on, August 14th, 2025 to shareholders of record. As of August 11th, 2025 with that. Let's open the call the questions.
Thank you. Kevin. We ask that you limit yourself to 2 questions. Operator, may we have the first question, please.
Certainly. We'll go ahead and take our first question from Michael engh with Goldman Sachs. Please go ahead.
Hey, good afternoon, uh thank you for the questions. I just have 1 on upgrade rates and 1 on capex. Um, first on the upgrade rates, um it is is encouraging to see the the the records on iPhone Mac and watch. I was wondering if you're seeing strength in the upgrade, uh, rates or is the records more function of the, the growing install base? Um, you know, what is your research showing that made upgrades, uh, particularly compelling this year? Um, for example, is it product features tariff, pull forward, perhaps Apple intelligence, uh and then I'll give my follow-up on capex.
Okay.
Got the contacts first. Yeah, we'll do capex first.
Yeah, sure. Just on. Yeah, go ahead. Just on the capex. Um, you know it's it's up uh notably year to date. Um could you just comment on uh your Capital spending plans this year and next and provide some qualitative color in terms of what's driving that growth is it uh AI related or supply chain uh diversification for instance. Thank you. Yeah. Mike, it's it's a combination of factors. I would say a pretty significant driver of his. Tim talked about is the fact we are increasing our investments significantly AI. So that is certainly a component of it. Uh, you know, we've investing in private Cloud compute, which is also in our first party data centers. Um, the other piece is, you know, is we do have a hybrid strategy, where in cases, we do use third parties to make Capital Investments and we also invest in our own so you are going to see an increase in capex. We also um, from time to time have other investments in facilities, uh, in tooling. But I would say a significant portion of the driver of growth um, that you're seeing now is really driven by some of our AI related Investments.
On the upgrades, uh, Michael, if you look at iPhone, the 16 family, uh, grew double digits as opposed to the 15 family from the year ago quarter. And so, we did set an upgrade record. I think it directly is because of the strength of the product.
Uh, Mack also set records, uh, on upgrade. Uh, and I think, you know, we continue to see a move to Apple silicon.
And the the performance of of Apple silicon is playing a a very key role. And so it was it was an incredible quarter in terms of uh if you're wondering about
Pull forward.
We would estimate the, the pull forward of demand, uh, into April specifically, to be about 1 point of the 10 points.
All right, thank you. Thank you Tim. Thank you. Kevin.
Thanks Mike. Operator, could we have the next question, please?
Our next question is from Eric wood ring with Morgan Stanley. Please go ahead.
Good afternoon, guys. Thank you very much for, uh, for taking my questions. I've, uh, I have to do as well. Um, okay, maybe starting with you, uh, you know, shortly after March quarter earnings. Uh, there were some reports about searches on Safari declining in April, for the first time I think in over two decades. Um, judging by your 13% Services growth this quarter, it doesn't seem to indicate that April trends necessarily played out through the remainder of the June quarter. And so I'm really just looking for a little bit more color on really how the rest of the quarter played out and if you believe Apple products, uh, as kind of search access points are losing their strategic value as AI platforms become more valuable, popular, or increasing in strategic value. And that I have a follow-up. Thank you.
I think they continue to be, uh, very valuable. I, I think that consumers, uh, behaviors are evolving, uh, and we're monitoring it, uh, very closely.
Okay, I appreciate that. Thanks Tim. Um, and then, you know, maybe second to that, um, I'd love if you could maybe elaborate a bit on what you're seeing in China. You know, I think in the interview, earlier this afternoon, you alluded to, uh, some of the promotions being Tailwind, but just bigger picture. If we take a step back in China, you know, how, how would you characterize demand interest in the iPhone 16 and some of your other products uh is is that shifting or or maybe were some of the trends in the June quarter, maybe a bit more 1 time and unique in nature. Thank you so much.
Yeah, we we did grow in Greater China by 4% during the quarter, uh, versus the previous quarter. It was driven by an acceleration, uh, buy iPhone. Uh, although we also had substantial growth on the Mac year-over-year, uh, from a, the as, you know, the government has placed certain subsidies, uh, that affect some of our products. Not not all of them, but there are some of them and I think that had, uh, some effect. It was the first full quarter of the of the subsidy playing out.
Uh, that it cut in, uh, during, uh, a portion of the previous quarter.
Uh, also, the other thing I would say is that the install base hit a record high in Greater China.
And we set an all-time record for the iPhone install base. The iPhone upgraders in mainland China, set a record for the June quarter.
And uh, according to World panel, which was formerly known, as kantar iPhone had the top 3 models in urban China, which is extraordinary. Uh, also, if you look at the other products, uh, Mac, iPad and watch,
The majority of customers that are buying in in China, Mainland were new to the product.
Uh, so lots of good things there and, uh, the, the other thing, I would point out, which is interesting. Interesting point, the MacBook Air was the top selling laptop model in all of China. And the Mac Mini was the top selling desktop model in in all of China. So overall I uh, a a positive, uh, very positive quarter.
Great. Thanks for the caller, Tim. Good luck. All right, thank you, Eric. Thanks, Eric, operator, can we have the next question, please?
Our next question is from Ben ritzy with Melius research. Please go ahead.
Yeah, thanks. I I really appreciate it. Um, I wanted to uh, ask about, uh, Siri Tim and just the overall AI, um, in investment. Um, there there's a perception that, um, Siri is going to help Drive other new products, uh, potentially that, that, you know, maybe we're voice is, is quite needed and, uh, just wondering, uh, in your, you know, how's your confidence towards launching that next year? Is there anything that that's been done internally to increase that confidence? Is it tied to the investment? I just think folks would would love to know uh a little bit more about your your confidence and how that's going. And then I have a follow-up. Thanks.
Progress on a more personalized Theory and we do expect to release the features next year as we had said earlier. Uh, our Focus from an AI point of view is on, uh, putting AI features across the platform that are deeply, personal private and seamlessly integrated. And of course, we've done that with more than 20, Apple intelligence features so far from visual intelligence to clean up to writing tools and, and all the rest, uh, we are significantly growing our investment.
We did during the June quarter. We will again in the September quarter. I'm not putting specific numbers behind that at this point, but you can probably tell them the guidance that things are moving up. We are also, uh,
Reallocating uh a fair number of people to focus on on AI features within the company uh that are uh you know, we have great uh great team and uh we're we're putting all of our energy behind it.
In terms of Pro, in terms of other products. I, I, you know, I don't want to really.
Comment on specific other products. But, uh, we have an exciting roadmap ahead, and, uh, I could not be more excited about it.
That's great. Tim, thanks for the caller. Um, just with regard to my second question is about the overall Revenue guide and I appreciate that. You know, you you guide, uh, the best, you can see it, but I just wanted to challenge it from a different way. Is, you know, why would it decelerate, uh, if service is is staying uh, the same at 13? What is there? A conservatism there, you know, I would think even currency is just as favorable if not more favorable. So um, why why would it decelerate to the higher single digits from where you were in the quarter? Or is it just being conservative? And if there's something decelerating or a comp? Do you mind just pointing that out? Thanks.
Yeah, been, this is Kevin. Uh, thanks for the question. I think, when you look at the, the growth from from Q3 which is reported to the mid to high single digit guide, I think you have to kind of keep in mind 2 components. The first is the, you know, the effect uh, of the Tariff, you know related, pull ahead and demand that Tim referenced earlier which we estimated to be about 1 point of the 10 points. Um, that we ended up um, doing a few Q3. And then the other factor that I think give or take into consideration is the fact that in September quarter a year ago, we had the full quarter impact of the iPad launches which also leads to a difficult compared this year.
So, those 2 components are things. You have to take into consideration as you think about the move from Q3 to Q4, I would say foreign exchange is a very minor Tailwind um going from Q3 to Q4. So not really a major factor.
Okay, thanks a lot.
Awesome. Thank you, Ben operator, could we have the next question, please?
Our next question is from Wy men. Yes Bank of America, please go ahead.
Hi, yes, thank you so much. Um, uh, Tim, I know you said similar growth in services and that's predicated with with Google payments. Continuing is there any way for us to dimensional um sort of or maybe just conceptually talk about maybe options if if if the counter were to happen, if the payments were not allowed in some way uh what are some of the things that Apple could do given that? It is a significant chunk of profitability and I will follow up. Yeah, well see I don't really want to speculate on the the Court ruling and and how they would Rule and what we would do as a consequence of it,
Okay, okay, I guess we'll wait for wait for that ruling to come out. Um, I I guess separately, uh, Tim at a high level when you, when you look at, um, some of what is, uh, perceived fears of new form factors and and ways to interact with devices. Uh, there is, uh, some worry that given some of the development.
That there could be a world where dependence on screen based devices significantly diminishes. And I'm kind of curious to get, you know, your thoughts on, if do you think that that would happen and, and rate and Pace in which and and how do you think apple is preparing in in in that case?
Yeah, when you think about all the things an iPhone can do, from connecting people to bringing app and game experiences to life to taking photos and videos.
Pay for things and so much more.
Uh, you know, it's it's difficult to see a world where uh, iPhones not living in it.
And that doesn't mean that we are, uh, not thinking about other things as well, um, but I think that, that the devices are likely to be complimentary devices. Not not substitution.
Okay, thank you so much, Tim. Thank you. Thank you, WSY operator. Could we have the next question, please?
All our next question is from Amit Darien, Ani with evercore. Please go ahead.
Yep. Um, good afternoon. Um, I guess I should start with, uh, you know, Tim, the tariff assumption of $1.1 billion in the September quarter. I kind of saw. I understand the optics you folks are talking about, uh, but can you just talk about, you know, assuming tariffs remain at these levels or even if they evolve under Section 232, how do you eventually think about offsetting this headwind into your P&L? Uh, and when you decide to execute on the levers to offset this headwind versus just looking into your bottom line.
uh, you know, right now we're just estimating the cost of it and uh, it's up uh,
Quarter of a quarter uh because our volume is up, quarter over quarter. And there was some, um,
Uh, build ahead in the in the previous quarter and so that's the primary reasons that it's, that it's up.
In terms of of what we do to mitigate, uh, we we obviously uh, try to optimize our our supply chain and ultimately uh, we're we will do more in the United States. Uh, We've committed 500 billion uh investment in the US over the next 4 years. And and we've already uh, building, uh,
Chips and Arizona. And in fact, we're building semiconductors across, uh, 12 States and, and 24 factories and have a, a lot of other things in the works. You probably saw the the investment in mp materials.
Uh, last week. Uh, and so we continue to to explore these things and and look for for more that we can do, which I think ultimately is the objective.
Got it. Super helpful. Um, and then your services growth, I think, was extremely impressive at 13%, especially even on the fierce folks had. Um, can you just touch on? Did you see any impact that was notable from the Epic case and the steering dynamics that came after that? And maybe just touch on what is that?
Appeals process looks like looks like for me as you go forward. Thank you.
Yeah, this is Kevin. Let let me take that 1. Um, in general, I think just reminding. I think you just said we had a very strong um, Services quarter. Um, we had an all-time record and the 27.4 billion dollars up 13%. Um, the 1 thing I would also say is our services reformers with broad-based, so we also saw strength in developed and Emerging Markets both. Um, parts of the world had double-digit growth. And we also saw a sequential acceleration across the majority of our categories including cloud services where I mentioned in, um, the prepared remarks that we had an all-time Revenue record.
As it relates to the Epic decision, you know, we keep in mind that we only just introduced the change required by the court in the June quarter. As you know, we don't provide the level of detail. But, in general, I would say it was a very, very strong quarter. In the US, we had double-digit growth for the US App Store, and we set an all-time record. We will continue to monitor the effects on the market.
Our business, but we'll continue to innovate and ensure that the App Store delivers the best experience for users and remains a great business opportunity for developers.
All right, thank you, Ahmed. Operator, could we have the next question, please?
Our next question is from David vote with UBS. Please go ahead.
In the June quarter, maybe you can help us understand, you know outside of maybe the promotional activity. What else were some of the drivers that led to what was looks like a pretty significant above seasonal strength, in the June quarter. Thanks.
Yeah, in terms of the, um,
The tariff situation and, and, and, uh, country of origin and so forth. One thing I would say just to remind everyone is.
Keep in mind that the vast majority of our products are covered under the section 232 investigation.
And so the, uh, today, uh, or I should say, last quarter, the, the bulk of the tariffs that we paid were the, I, uh, eepa uh, tariffs that hit early in the year, uh, related to China.
And, and so that, that's just a reminder of what where, what where things are and what we assume as we uh calculated the the projection of 1.1 billion, uh, that's in our Outlook color. In terms of the, the country of origin, it's the same as I referenced. Uh, last quarter, there hasn't been a change to that, which is the, the vast majority, uh, of the iPhone sold in the US or the majority, I should say, uh, have a country of origin of in
The, uh, and uh, the, the vast majority of the products other products, the Mac, uh, and the iPad, and the watch have a country of origin of Vietnam that are sold in the United States.
Still, uh, the the products for other International, uh, countries. The vast majority of them are coming from China and so that hopefully, gives you a, a flavor of the of where things are. Um, but I would, I would stress again that, uh, we do a lot in this country in the United States and we've committed 500 billion and we're always looking, uh, to do more and you, you could kind of see that in the, the most recent announcements, whether it's MP materials or our Manufacturing Academy that we're standing up in Detroit, uh, in a couple weeks or so. And and so, we're going to be doing, we're doing more in this country and that's on top of having uh, roughly 19 billion chips.
Coming out of the US. Uh, now and we're, we will do more, uh, and of course, glass, uh, for my phone and the face, ID module. And so there's, there's loads of different things that are done in the in the United States.
And David and then on the that on the iPhone activity. Yeah, so I was going to mention the iPhone activity. Um, you asked if there's any kind of unique characteristics, this quarter, I would just say is Tim outline. We really believe that the strong upgrade performance which was a, you know, June quarter record was really driven by the strength of the product lineup. You know, the iPhone 16 family, um, has done incredibly well compared to the iPhone 15 family and we also have you recall, you know, recently introduced the 16e as well, which also continued to, you know, impact the success of the overall iPhone 16 lineup.
Great. Thanks guys. Thank you great. Thank you. David operator, could we have the next question, please?
Our next question is from Chris sanker.
With TD Cowen.
I told them the first of Kevin um this was the previous question. Uh, do you think there was any pulling of iPhones in the June quarter? They met to some of the upside and how to think about Channel inventory in June quarter and how it looks in September the letter to the seasonal Trends and then I had a a longer term follow-up for Tim.
Uh, let me see if I can answer the channel inventory question, or, or what I think is the challenge of a question. Uh, if you look at iPhone Channel, inventory from the beginning of the quarter, to the end of the quarter, uh, we reduced it and it ended toward the low end of our targeted range.
And so that's the answer on the inventory piece of it.
In the marketplace. And so we felt that that was, from what we saw, about a 1-point impact of the 10-point, uh, at the total company level of growth. And so that was the limited impact that we saw for the quarter.
Got it very helpful. I mean I just had like a long-term follow-up for uh Tim. Uh Tim. I'm kind of curious about your thoughts on AI for Edge devices. You know, there's like some people who think that llm could be a commodity in the future. Uh, do you think, do you see a scenario where the llm
Become a core part of your iOS or it's a slm the way to go. And how to think about evolution of edge devices in a futuristic AI world and a smartphone going to be the choice of device. Just curious your thoughts on it. Uh, broadly speaking, thank you.
I the way that we look at AI is that it's one of the most profound technologies of our lifetime, and I think it will affect, uh, all devices in a significant way. Uh, what pieces of the chain are commoditized and not commoditized? I wouldn't want to, uh, to really talk about today, uh, because that gives away some things on our strategy, but, uh, I think it's a good question.
Thanks Jim. Yeah.
Thank you, Chris operator, could we have the next question, please?
Our next question is from stomach chattery with JP Morgan. Please go ahead.
Oh yeah. Hi, uh, hi. Thanks for taking my questions. Uh, Tim, maybe if I can start with your, um, remarks about the pull ahead being about a 1 percentage point, um, in, um, benefit here. Um, anything to share in terms of how, what's underlying that estimate in terms of what you’re seeing for, uh, is it a pull ahead largely on iPhones, or is it across the board? And is it primarily in the US or again, sort of across multiple regions? Any color there would be helpful in terms of how you’re sort of getting to that, um, assumption there. And I have a follow-up. It was principally on iPhone and Mac.
um, and it was pretty
You know, it was obvious evidence of it. It was an unusual buying pattern there and, uh, that largely occurred in April toward the beginning of the quarter.
Um, and it was, uh, really, we believe it was largely the United States.
Okay, okay.
And maybe, um, on the Tariff front, um, when you gave the estimate of 900 Million last quarter, um, which came in 800, you did highlight. It was there was some unique factors in the quarter, uh, when I take the 1.1 billion that you're Now sort of expecting for the September quarter. Uh and as we start to think about December uh would is there anything unique in the December quarter in terms of uh Source saying from regions Etc? That would uniquely impact December. Just given sort of that, you had highlighted the quarter to quarter. So there would be unique things. Just curious if December looks very different from September because of Any unique factors, I I would be careful about projecting, uh, based on the, the numbers from Q2 and Q3 because, uh, 1, we're we're uncertain of what the rates will be.
Uh, and so the rates might change, uh, particularly in uh, the last quarter. Uh, we had some build ahead.
uh, inventory that we were uh that we had within within the company and within our supplier, with within our supply chain
And so those 2 are a little unique also as you know from following us for so long, uh q1 is generally a higher volume quarter.
And uh, the tarot tariffs are uh are currently are pretty linear with with volume.
Trader, could we have the next question, please?
Order. Uh, and I guess across the business and in particular, maybe on the services segment and, and on a year-on-year basis, how much currency benefits should we be thinking about, uh, embedded in the guidance, uh, into the September quarter? And then the second quick question is, you know, CapEx is clearly moving higher. Um, I know you guys don't guide specifically to that number, but just kind of qualitatively, should we, as you lean in more on AI, should we really start to see that CapEx, which is running close to about $4 billion annualized today, really start to move appreciably higher? Any color on that would be helpful. Thank you.
Great Aaron, thanks for the questions. Let me answer the first one. Um, first-round foreign exchange for Q3 really had, um, no impact from a foreign exchange standpoint on the year-on-year results. And so, um, when we look at both the revenue, um, growth as well as the gross margin, there was really a, you know, virtually no impact from foreign exchange as we look at going from the Q3, the June quarter, to the September quarter. Um, again very, very, um, as I mentioned earlier, a very small tailwind, um, going from Q3 to Q4, um, from a foreign exchange standpoint on both revenue as well as gross margin.
And then, on the second question. Sure, on the CapEx side, I think we talked about the fact that we are, um, and Tim, you know, mentioned the fact that we are increasing our investments significantly in AI. Um, you are going to continue to see our CapEx grow. It's not going to be exponential growth, but it is going to grow, you know, substantially. And, you know, a lot of that’s a function, um, of the investments we're making in AI. As we mentioned, we also have other items that fall into that category, um, facilities and, um, some of our retail store investments. But I would say a lot of the growth is really being driven by AI. I would remind you that we do have a hybrid model, though, where we also leverage third-party, uh, infrastructure in addition to investing in our own first-party infrastructure.
Yep, thank you.
Thank you.
Thank you, Aaron. Operator, may we have the next question, please.
Our next question is from Ois Marik with Citi. Please go ahead.
Hi. Thank you for taking my questions. Tim at the WWDC earlier, in the quarter you showed impressive updates on Vision Pro with the use of vids, spatial scenes and new ways to create content appears like meta, and Jaime are seeing strong momentum on their AI classes. So is the focus still around Enterprises on Vision Pro, are you thinking of broadening the use cases maybe tying it to a to to more of your devices. Any thoughts on uh Vision Pro? As it did not get uh enough air time in the prepared, remarks.
Yeah, thanks. Thanks for bringing it up. I was thrilled with the release from the team on Vision Pro, OS 26.
Uh, it it includes many things in it like spatial widgets to enable users to customize their digital space. The personas took a huge uh, increase with they're much more lifelike. And of course, there's new Enterprise apis, uh, for companies as well. And we're seeing as Kevin, uh, talked about in his opening remarks, we're seeing, uh, those things resonate, uh, out with CAE and other other, uh, customers. And so we continue to be, uh, very focused on it. Uh, and I, I don't want to get into the roadmap on it, but this is an area that we really believe in.
Great. And Kevin historically, uh, you guys have not done much big m&a, do you feel like you need to accelerate your AI road map or just keep the organic Focus? You know? Let me take, take that 1 as well. Uh, We've we've acquired around 7 companies this year.
And, uh, that’s, uh, companies from all walks of life, not all AI-oriented. And so we’re doing one, think of it as one every several weeks.
Uh we're very open to m&a that accelerates our roadmap. Uh we are are not uh stuck on a certain size company, although the ones that we have acquired thus far. This year are small in nature, uh, but we we basically ask ourselves whether a company can help us accelerate a road map. If, if they do then, uh, we're interested. But we don't, we don't, we don't have anything to share specifically today.
All right, thank you Otis.
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